A $3 billion (£2.3 billion) bailout for Pakistan has received board approval from the International Monetary Fund (IMF)
The country
in crisis will receive approximately $1.2 billion upfront, with the remaining
amount to be paid over the following nine months.
The South
Asian country had just enough foreign currency to cover a month's worth of
imports but was on the verge of going into default on its bills.
The nation
also got funding this week from Saudi Arabia and the United Arab Emirates
(UAE), two allies.
The bailout,
according to Pakistan's Prime Minister Shehbaz Sharif, was a significant
advancement in attempts to stabilize the economy.
"It
strengthens Pakistan's economic position to overcome short- to medium-term
economic obstacles, giving the next government the fiscal space to map out the
way forward," he added.
After eight
months of protracted discussions about how to address Pakistan's faltering
economy's major long-term problems, the IMF agreement was reached.
The nation
had been in danger of being unable to pay its creditors back for its debt.
Devastating
floods that affected a large portion of the nation last year contributed to the
nation's other major issues, such as excessive inflation and economic
mismanagement by previous governments.
Tuesday saw a
$2 billion deposit from Saudi Arabia with Pakistan's central bank, according to
Ishaq Dar, the country's finance minister.
Mr. Dar
announced on Wednesday that the central bank had also received $1 billion from
the UAE.
Middle
Eastern countries, which are abundant in energy, had pledged the funds in April
but delayed delivering them until it was clear that the IMF rescue would be
completed.
The IMF
agreement will make more money available to strengthen Pakistan's faltering
economy in addition to the aid from Saudi Arabia and the United Arab Emirates.
According to
Mr. Dar, Pakistan's foreign exchange reserves are anticipated to reach $15
billion by the end of this month.
Investors in
Pakistani stocks were somewhat relieved on Monday after the credit rating firm
Fitch raised Pakistan's sovereign rating.
Since the IMF
issued preliminary permission for the bailout at the end of June, the price of
the severely indebted nation's bonds has skyrocketed.
To comply
with the terms of the bailout, Mr. Sharif's coalition government, which must
hold a national election this year, must still make significant budget cuts.
In Pakistan,
living expenses have been steadily rising. Currently, the official yearly rate
of inflation is close to 30%.
In an effort
to rein in increasing costs, the nation's central bank increased its benchmark
interest rate to a record high of 22% last month.
The IMF has
long supported Pakistan, and this week's bailout is only the latest in that
series of assistance. Since 1958, it has borrowed money from the international
lender more than 20 times.
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